How Do Settlements Work in Futures Trading?

Settlement is the daily process through which the exchange establishes an official closing price for each futures contract. This price is used to update account balances, calculate profit and loss, and verify margin requirements.

Settlement prices are determined by the exchange based on trading activity during a 
specific time window near market close. These prices serve as a benchmark for valuing open positions.

Example: If the settlement price is higher than your average entry price on a long position, open trade equity will show a gain on the account. If the settlement price is lower than your average entry price on a long position, open trade equity will show a debit on the account.

More information on settlements can be found on the CME Group Website.